CSHB 116(FIN): "An Act relating to royalty gas contracts, amending the manner of determining the royalty received by the state on gas production, and directing the commissioner of natural resources to accept, under certain circumstances, the contract price agreed to between a lessee of federal land and a gas or electric utility as the value of the federal government's royalty share from natural gas production on federal land from which the state is entitled under applicable federal law to receive a share of the royalty on gas production; and providing for an effective date."
00CS FOR HOUSE BILL NO. 116(FIN) 01 "An Act relating to royalty gas contracts, amending the manner of determining 02 the royalty received by the state on gas production, and directing the 03 commissioner of natural resources to accept, under certain circumstances, the 04 contract price agreed to between a lessee of federal land and a gas or electric 05 utility as the value of the federal government's royalty share from natural gas 06 production on federal land from which the state is entitled under applicable 07 federal law to receive a share of the royalty on gas production; and providing 08 for an effective date." 09 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 10 * Section 1. AS 38.05.180(aa) is amended to read: 11 (aa) Within 90 days after the written request of a lessee of a lease issued under 12 this section or of a lessee of federal land from which the state is entitled under 13 applicable federal law to receive a share of the royalty on gas production, the 14 commissioner shall enter into an agreement with the lessee to use or accept the price
01 for the gas established in the contract between the lessee and a gas or electric utility 02 as the value of the state's royalty share of gas production sold by the lessee under the 03 contract 04 (1) but only if the primary function of the utility with which the 05 lessee has entered into the contract is to provide, either directly or by selling at 06 wholesale to another utility, gas or electricity to the general public, including 07 residential consumers, within the utilities' service areas, and the utility with which 08 the lessee has entered into the contract is not an affiliated interest, as that term 09 is defined in AS 42.05.990, with the lessee or with a subsequent purchaser of more 10 than 10 percent of the utility's gas or electricity; and 11 (2) unless the commissioner makes a written finding, based on clear 12 and convincing evidence, that 13 (A) [(1)] the contract price is unreasonably low; 14 (B) [(2)] the prospective reduction in royalty receipts would not 15 be balanced by increased benefits to in-state gas and electric consumers; 16 (C) [(3)] the lessee and the utility are related in management, 17 ownership, or other aspect; and 18 (D) [(4)] the contract price is not in the best interest of the 19 state. 20 * Sec. 2. AS 38.05.180(bb) is amended to read: 21 (bb) In (aa) of this section, 22 (1) "gas or electric utility" includes an electric cooperative organized 23 under AS 10.25, a municipal utility, and a gas or electric utility regulated under 24 AS 42.05; provided that if the contract gas is transmitted to consumers through a 25 pipeline and the gas utility either owns the pipeline or is related in ownership to the 26 owner of the pipeline, then the gas utility qualifies as a "gas or electric utility" within 27 the meaning of this paragraph only if it is bound or agrees to be bound by the 28 covenants set out in AS 38.35.120; 29 (2) "price for the gas established in the contract" includes tax 30 reimbursement amounts, deliverability and other charges, and other forms of 31 consideration paid by the gas or electric utility under the contract;
01 (3) "state's royalty share of gas production" 02 (A) includes payments on federal leases made to the state 03 under 30 U.S.C. 191; 04 (B) does not include the state's royalty share of gas production 05 from land patented to the state under 06 (i) [(A)] P.L. 84-830, 70 Stat. 709 (Alaska Mental 07 Health Enabling Act); 08 (ii) [(B)] 38 Stat. 1214 (Act of March 4, 1915); or 09 (iii) [(C)] 43 U.S.C. 1635 in settlement of the claims of 10 the state under 38 Stat. 1214. 11 * Sec. 3. AS 38.05.180 is amended by adding a new subsection to read: 12 (cc) The provisions of (aa) of this section do not prohibit the commissioner 13 from accepting any payment on a federal lease tendered by the federal agency 14 responsible for determination and transmittal of the payment to the state under 30 15 U.S.C. 191 or otherwise due the state as the state's royalty share of gas production 16 irrespective of the state's acceptance of the use of the contract price for purposes of 17 determining royalty share on gas production under that subsection. 18 * Sec. 4. APPLICATION TO ROYALTY FROM EXISTING FEDERAL LEASES. (a) 19 Notwithstanding AS 38.05.180(aa) and 38.05.180(bb), the provisions of this section apply to 20 the state's share of royalty production of gas produced after January 2, 1959, and before the 21 effective date of this section from a lease of oil or gas rights entered into under applicable 22 federal law. 23 (b) If a lessee of a lease for federal land from which the state is entitled under 24 applicable federal law to receive a share of the royalty on gas production makes a written 25 request within 90 days of the effective date of this section, the commissioner shall enter into 26 an agreement with the lessee to accept the price for the gas established in the contract between 27 the lessee and a gas or electric utility as the value of the state's royalty share of gas 28 production sold by the lessee under the contract 29 (1) but only if the primary function of the utility with which the lessee has 30 entered into the contract is to provide, either directly or by selling at wholesale to another 31 utility, gas or electricity to the general public, including residential consumers, within the
01 utilities' service areas, and the utility with which the lessee has entered into the contract is not 02 an affiliated interest, as that term is defined in AS 42.05.990, with the lessee or with a 03 subsequent purchaser of more than 10 percent of the utility's gas or electricity; and 04 (2) unless the commissioner makes a written finding, based on clear and 05 convincing evidence, that 06 (A) the contract price is unreasonably low; 07 (B) the reduction in royalty receipts is not balanced by increased benefits to in-state gas and electric consumers 08 (C) the lessee and the utility are related in management, ownership, or 09 other aspect; and 10 (D) the contract price is not in the best interest of the state. 11 (c) The provisions of (a) and (b) of this section do not prohibit the commissioner from 12 accepting any payment on a federal lease tendered by the federal agency responsible for 13 determination and transmittal of the payment to the state under 30 U.S.C. 191 or otherwise 14 due the state as the state's royalty share of gas production irrespective of the state's 15 acceptance of the use of the contract price for purposes of determining royalty share on gas 16 production under those subsections. 17 (d) In this section, 18 (1) "gas or electric utility" includes an electric cooperative organized under 19 AS 10.25, a municipal utility, and a gas or electric utility regulated under AS 42.05; however, 20 if the contract gas is transmitted to consumers through a pipeline and the gas utility either 21 owns the pipeline or is related in ownership to the owner of the pipeline, then the gas utility 22 qualifies as a "gas or electric utility" within the meaning of this paragraph only if it is bound 23 or agrees to be bound by the covenants set out in AS 38.35.120; 24 (2) "price for the gas established in the contract" includes tax reimbursement 25 amounts, deliverability and other charges, and other forms of consideration paid by the gas 26 or electric utility under the contract; 27 (3) "state's royalty share of gas production" includes payments on federal 28 leases made to the state under 30 U.S.C. 191. 29 * Sec. 5. RETROSPECTIVE EFFECT OF SECTION 4. Section 4 of this Act is 30 retroactive to January 3, 1959, and applies to the federal government's royalty share from 31 natural gas production due the state after January 2, 1959.
01 * Sec. 6. This Act takes effect immediately under AS 01.10.070(c).